Word on the web: Global changes in the world of asset management

Fidelity International changes their payment model as the UK and Saudi Arabia help their respective sectors
by Jake Matthews

Fidelity International has become the first major asset manager to change its structure to a performance-based model, Expert Investor’s Tjibbe Hoekstra writes.  

The firm will give back money to clients if funds underperform over a rolling three-year period. They will initially charge a lower base management fee, sharing “in the upside” if funds outperform expectations. 

The decision comes after Morningstar recently implored asset managers to change to a performance-based structure. 

The new structure will come into effect next year, a Fidelity spokesperson told Expert Investor, with some clients set to benefit from the model as early as January 2018. 

Fidelity International’s president, Brian Conroy, said that this demonstrates real commitment to the firm’s active management capability. “We will move away from a flat fee model and get paid according to how well we do for our clients,” he is quoted as saying.   

It is hoped that these changes will align Fidelity’s performance with its clients’ portfolios, thus delivering what the company and regulators are looking for, he continued. “Our fee structure will give back for underperformance of the benchmark, whereas others do not.”
Expert Investor article
Saudi Arabia’s asset management vision Change is also afoot in Saudi Arabia, Reuters’ Katie Paul reports, with relaxed rules for licensing asset management and other investment firms, according to a recent presentation by senior officials at the Capital Market Authority (CMA). 

The CMA’s changes are part of its ‘Vision 2030’, a reform plan that intends to diversify the Saudi Arabian economy beyond oil. 

Requirements for a ‘management activity’ licence will be reduced with the intention of increasing private equity and venture capital investments, and boosting asset manager numbers. 
“Our fee structure will give back for underperformance"Two new types of these activities are permitted: “managing non-real estate investment funds and managing the portfolios of small but experienced investors”. 

The minimum net assets for ‘management activities’ has gone down from SAR50m (£10m) to SAR20m (£4m); and to be classed as an ‘investment company’, minimum net assets have been reduced from SAR50m (£10m) to SAR10m (£2m). 

‘Specialised investor’ work experience and certification requirements have been broadened too.

It is anticipated that these changes will be announced with a new raft of merger and acquisition rules that have a specific focus on driving debt issuance.   

Reuters' article
UK’s asset management taskforceIn the UK, a taskforce of chief executives from the asset management sector and senior representatives from investor groups and the FCA is being assembled. 

Investment & Pensions Europe’s Susanna Rust cites a conference address in London by economic secretary Stephen Barclay, where he said the establishment of the taskforce was a response to a request by the sector. The Government wants to preserve the sector’s right to delegate portfolio management, despite Brexit. 

The taskforce, Barclay outlined, would help meet the challenges posed by the UK’s impending exit from the EU by being “a forum to discuss how government, industry and the regulator can work collaboratively to stay competitive and deliver for investors”. It will also help align the Government’s bid to keep the UK as “the best place in the world for financial management”.  

One way it intends to do this is by supporting business opportunities in non-European countries such as Brazil. Barclay said: “These are opportunities that we’re determined to realise, whether that’s attracting Brazilian pension funds to the UK or enabling UK firms to do more business in Brazil.” 

The Government will also support the global delegation model for portfolio management. Barclay explained: “A restricted delegation model would cause fragmentation and prompt funds located in Europe [to] leave the continent for other financial centres such as New York or Hong Kong.” 

Barclay’s talk emphasised the importance of asset management to both himself and the Government. The Saudi Arabian Government, too, recognises this importance, which is why it is tying its future prosperity to it; while inside the sector, payment fees have been changed to give the client a better, fairer deal. It’s certainly an interesting time for asset management.  

Investment & Pensions Europe article

Seen a blog, news story or discussion online that you think might interest CISI members? Email jake.matthews@wardour.co.uk.
Published: 06 Oct 2017
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